Marketing Strategies for Various Planned Gifts

We Have Marketing Strategies for Specific Gift Vehicles Here SECTION ONE CHARITABLE BEQUEST Most donors are able to make far larger charitable gifts as bequests at death through their will or Revocable Living Trust, than they can through outright gifts during their lifetime. Typically, charitable bequests come from accumulated assets rather than from current income. A testamentary gift or bequest from a will or Revocable Living Trust is revocable during the grantor’s lifetime, thus providing a hedge against unforeseen events. In effect, the bequest operates like a postdated check payable only after death. A gift by will or Revocable Living Trust can be made by stating a specific amount of funds or specific real and personal property. A gift by will or Revocable Living Trust can be made by stating a percentage of estate or trust assets that will go to First United Methodist Church. A gift by will or Revocable Living Trust can be made by designating all or a portion of the remainder of an estate or trust assets to come to First United Methodist Church. A will or Revocable Living Trust may be used by a donor to transfer wealth to loved ones, as well as to First United Methodist Church. These vehicles are often used to settle concerns about custody of children, reduce estate taxes, and to address concerns regarding mental or physical incapacity or prolonged illness in conjunction with “Medical and Financial Powers of Attorney” and “Right to Die” documents. A Revocable Living Trust is often used to reduce or avoid probate, particularly in states with higher probate costs, or when property is owned in several states. It is also used to facilitate asset management or personal care without requiring court approval, especially if the property owner is handicapped or may become legally incompetent. A Revocable Living Trust provides confidentiality, and may also be used to take advantage of estate and gift tax credits and deductions. Most donors either do not have a will or Revocable Living Trust or do not fully understand the probate process. The advantages of charitable bequests and trusts can be effectively promoted through periodic newsletters and communications on estate and financial planning to donor prospects. The First United Methodist Church Endowment Committeer, networking with attorneys, CPA’s, trust officers and other members of the financial community, may use these contacts to promote charitable bequests and gifts by trust. SECTION TWO OUTRIGHT GIFTS OF PERSONAL PROPERTY The tax savings from an outright gift of personal property to First United Methodist Church may be more appealing to a prospective donor than either having to find a willing buyer, or continuing to maintain the property. A donor’s gift of artwork, collectibles, artifacts, library collections, gemstones or coins may have wider use, public exposure and benefit than if retained by the family. Such gifts also avoid the higher capital gains tax rates otherwise applicable at the time of sale. SECTION THREE OUTRIGHT GIFTS OF REAL PROPERTY . Many donors, particularly the elderly, appreciate the tax benefits and the simplicity of making a gift of real property to First United Methodist Church, as opposed to the task of managing or selling the property themselves. Some donors prefer to make a gift of real property to First United Methodist Church, with the understanding that First United Methodist Church will sell it at the earliest opportunity and use the proceeds to enhance the appropriate endowment fund. Any gain on the sale of property donated to First United Methodist Church is not taxed to the donor, provided the property was not subject to a binding agreement to sell created prior to the gift. Also, the sale of the property by First United Methodist Church is generally tax-free. SECTION FOUR BARGAIN SALE . A donor may sell valuable assets to First United Methodist Church at a reduced price. The motivation for such a sale, called a “bargain sale” may be one or more of the following: Avoid the burden of property Generate immediate liquidity Receive a lump sum payment or periodic income payment Supplement retirement income Save on taxes Spread the income taxation of the sale portion over several years Provide income after one’s death to spouse or heirs SECTION FIVE LIFE ESTATE AGREEMENT Donors may make a gift to First United Methodist Church of their personal residence or farm while retaining full use and rights to the property during their lifetime. The donor retains what is called a “life estate,” and First United Methodist Church receives the “remainder interest.” A current gift of a remainder interest deed (which retains the life estate for the donor) may be especially appealing to older donors, particularly if they had originally planned to make a bequest of their residence (or farm) to First United Methodist Church. A donor is not required to transfer the entire acreage attached to the personal residence or farm, but may keep or sell a portion of the property and still receive the special tax benefits for a remainder interest gift to charity. A gift by remainder interest deed to charity may preclude or put an end to any family contention over future disposition of certain assets in a donor’s estate. After making a gift of a remainder interest by deed to First United Methodist Church, the donor may continue to occupy the property or may do one of the following: a. move and leave the property unoccupied; b. lease or rent the property to third parties; c. give the life estate to children or others; d. give the life estate to First United Methodist Church; e. sell the life estate to First United Methodist Church f. join with First United Methodist Church to sell the life estate and remainder interest together; g. sell the life estate to a third party (but this may be difficult since the buyer’s interest typically terminates at the donor’s death) SECTION SIX CHARITABLE GIFT ANNUITY Gift annuities are especially appealing to retired donors willing to make a gift of cash or marketable securities to First United Methodist Church, and desiring to receive guaranteed payments at rates that may exceed what they are receiving from CD’s or other investments. Gift annuities appeal to donors interested in receiving guaranteed payments that are partially tax-free (since the after-tax effective rate is higher, even though the risk factor is quite low). Also the older the donor, the higher the annuity payment rate. Gift annuities are popular with professionals (e.g. doctors, architects, etc.) who want to supplement their retirement income. The guaranteed payments are not subject to the IRS limitations imposed upon “qualified” retirement plans. Gift annuities are an excellent way to increase cash flow and transfer management responsibilities for gift property. Gift annuities are very useful for providing immediate or deferred income payments for a spouse, handicapped child, or other individuals. A gift of appreciated property is often appealing because the tax on capital gain is reduced and spread out over a lifetime (if the donor, or donor and a designated survivor, receive the annuity payments). Reducing taxes is an added incentive for many donors since part of the value qualifies as an itemized charitable deduction. (The balance is treated as purchasing the annuity from First United Methodist Church.) Generally donors incur no legal costs for document preparation since the agreement with First United Methodist Church is both simple and brief whether the gift is large or small. First United Methodist Church is responsible for having the gift annuity agreement drawn by First United Methodist Church legal counsel. Donors are, however, encouraged to seek review by their own attorney. SECTION SEVEN POOLED INCOME FUND NOTE: At the present time, First United Methodist Church does not have a Pooled Income Fund. Therefore, until such time as a Pooled Income Fund is established for First United Methodist Church, no such gifts will be encouraged. 1. Donors may create a steady cash flow of income for themselves and others by contributing cash or other liquid assets to the First United Methodist Church Pooled Income Fund (PIF) which pools the assets and invests them for the benefit of all participants. 2. Assets placed in a PIF are invested conservatively to assure a reliable income for life. Payments can be for one or two lives, and are not interrupted by probate. Each donor’s proportionate share of all PIF assets will pass to First United Methodist Church at the death of the designated income beneficiary. 3. The PIF generates a cash flow for retirement or other purposes which may be greater than the income the gift asset is currently generating. 4. A transfer of a highly appreciated asset to the PIF may be more beneficial than an outright sale. The PIF not only pays a lifetime income but also creates an immediate charitable income tax deduction, avoids capital gains tax, reduces the estate tax, and avoids probate. 5. The tax savings may be used to replace the gift asset for the benefit of other family members. 6. The PIF is suitable for both large and smaller gifts, and provides confidentiality since the agreement is not a public record like a probated will. 7. Generally no legal fees are incurred by the donor since the transfer agreement is simple and brief. SECTION EIGHT CHARITABLE REMAINDER UNITRUST 1. Many different types of valuable assets may be sold through a unitrust to provide income for life or a period of up to 20 years to the donor or the donor’s designate. Later, when the trust terminates, the trust assets can benefit First United Methodist Church. 2. Generally the sale of valuable assets through a unitrust will avoid the capital gains tax on any appreciation, reduce or avoid estate taxes, and eliminate the need to probate assets placed in the trust. 3. The transfer of assets to a unitrust is deductible in part for income tax purposes. The charitable income tax deduction is equal to the present value of the charity’s remainder interest. By act of Congress in 1997, the present value of the remainder interest on a qualifying charitable remainder unitrust must be at least 10% of the amount of the assets placed in the unitrust by the donor. 4. Sale of valuable assets through a unitrust is often more beneficial than either keeping the assets or transferring them in a taxable sale. The unitrust enables an individual to be philanthropic while also meeting his or her own retirement or other needs with inflation-sensitive income payments. 5. Many donors choose to use some of the tax savings and cash flow from the unitrust to replace the gift asset for family and heirs. Sometimes this is done through an insurance policy or insurance trust, which has the tendency to enhance the value of the unitrust savings. 6. A unitrust can be used to transfer control of a family business or to transfer property management responsibility for problem assets. 7. Unitrusts are also used to increase cash flow, generate tuition payments for children or grandchildren, or provide support for elderly or handicapped family members. At the same time they create a sizable future gift for First United Methodist Church. 8. Unitrusts may allow donors to diversify assets tax-free while protecting them from creditors. SECTION NINE CHARITABLE REMAINDER ANNUITY TRUST 1. Many different types of valuable assets may be sold through an annuity trust to provide income for life or a "term" of years to the donor or donor’s designate. Later, when the trust terminates, the trust assets can benefit First United Methodist Church. 2. Generally the sale of valuable assets through an annuity trust may avoid the capital gains tax on any appreciation, reduce or avoid estate taxes, and eliminate the need to probate assets placed in the trust. 3. The transfer of assets to an annuity trust is deductible in part for income tax purposes. 4. Sale of valuable assets through an annuity trust is often more beneficial to the donor than either keeping the assets or transferring them in a taxable sale. The annuity trust enables an individual to be philanthropic while also meeting his or her own retirement or other needs with level payments of trust income (and/or principal if need be). 5. Many donors choose to use some of the tax savings and cash flow from the annuity trust to replace the gift asset for family and heirs. In some cases an insurance policy or insurance trust can be useful for replacing those trust assets that might otherwise have been given to family and heirs. 6. An annuity trust can be used to transfer property management responsibilities for problem assets, but care should be taken to assure sufficient liquid assets are available in the trust to satisfy the required annuity payments. 7. Annuity trusts are also used to increase cash flow, generate tuition payments to children or grandchildren, or provide support for elderly or handicapped family members. At the same time they create a sizable gift for First United Methodist Church. 8. Annuity trusts may allow donors to diversify investments tax-free while protecting them from creditors.   SECTION TEN CHARITABLE LEAD TRUST 1. Lead trusts are very appealing income and wealth transfer vehicles for donors with estates of several million dollars or more. The tax benefits are particularly appealing when the IRS floating interest rate (used to compute a charitable deduction) is low. 2. A "Grantor Lead Trust" is a useful tax savings device for assisting charity with periodic trust payments for several years. Property placed in the trust reverts to the grantor (donor) when the trust terminates. The grantor receives an income tax charitable deduction at the time property is transferred to the trust. In addition, though trust income is taxable to the grantor, taxation can be avoided by funding the trust with tax exempt municipal bonds. 3. A "Family Lead Trust" is used to assist charity while reducing or avoiding the gift and estate transfer tax on property placed in trust and later transferred to family (or others). The trust is designed to make periodic payments to charity for a period of several years, after which the trust terminates and the assets pass to the designated individuals either outright or in trust. 4. The Family Lead Trust is an excellent tool for donors to eliminate or reduce the gift tax cost of transferring wealth to children or grandchildren, and to channel future appreciation to heirs without further estate and gift tax liability. It is also an excellent vehicle for using a donor’s unified estate and gift tax credit now rather than later (when its value is likely to be eroded by inflation). 5. One type of a Family Lead Trust, known as a lead unitrust, is very useful for maximizing the donor’s generation-skipping tax exemption. 6. Major gift donors may use charitable lead trusts to fulfill pledge agreements with cash, stock, real estate (or a combination of these assets) placed in trust. The periodic payments to charity from the lead trust are ideal for establishing large endowed funds or to fund other special charitable projects.   SECTION ELEVEN LIFE INSURANCE 1. Life insurance makes it possible for a donor to convert a modest lifetime contribution into a much larger gift of insurance proceeds at death. 2. Many donors whose families are grown find themselves overinsured and capable of donating an insurance policy to First United Methodist Church. 3. Donors who wish to make a revocable gift of life insurance proceeds may do so by simply designating First United Methodist Church as the beneficiary of the policy. 4. A tax deductible gift can be made by irrevocably designating First United Methodist Church as both policy owner and the beneficiary. ### End of Markerting Strategies for Gift Types ###

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This Website updated on 12/30/2001